A sign which reads "Kill Inflation not Savings" is left outside following a protest outside the Bank of England in the City of London

Inflation isn't really a problem - as long as you don't have to eat, drive, travel by train or heat your house.

So goes the old joke among journalist who grow tired of speeches and statements from policy makers about the success of "price stability" in a modern economy.

The latest round of consumer price data from the Office of National Statistics will no doubt be treated in the same way by the sharper minds on the Bank of England's monetary policy committee: the surprise (and small: 0.1 percent) July acceleration in the cost of living will be put down to one-time increases while the overall trend of "deceleration" (inflation is a rate not a level, so it speeds up and slows down as opposed to rising and fall) remains in place.

After all, the annual trend has only sped up once in past five months and the MPC seems fairly convinced we'll ease back towards its preferred 2 percent target sometime next year.

On paper, it's a compelling argument.

In the world where most of us reside - where we're actually more interested in costs associated with eating, driving and keeping our children warm - it's a joke.

The indisputable collapse in UK economic growth since the credit crisis in 2007 has, sadly, been offset by a staggering rise in the basic components that most of us use to measure our costs of living.

The mainstream media has seized upon today's retail price inflation figure - rising a 3.2 percent clip - and its relationship with rail transport fare increases that are set to rise by more than 6 percent in January of next year.

But looking at prices rises over the past five years is even more arresting.

Food price inflation has accelerated by more than 30 percent. Transport costs by 38.5 percent. Public transportation costs have sped 45 percent and home energy prices have risen at a breathtaking clip of 49 percent.

It's, of course, little surprise to anyone reading this that wage growth has failed - manifestly - to match these unsustainable increases. Nominal weekly wages are only 9.9 percent higher than they were in 1997, owing to a surge in post-crisis unemployment and a steep decline in financial sector bonuses.

In effect, we're dealing with life in a contracting economy that's nearly 5 percent smaller than it was in 2007 but where most of the basic costs requried to live in it are three to four times more expensive in real terms. Coupled with the fact that it's harder to get a new job and/or negotiate a new pay deal than it was five years ago.

This, unfortunately, is the sort of empirical truth that never seems to find its way into a Mervyn King press conference.

The Bank of England Governor and his MPC colleagues have defended their £375bn programme of quantitative easing (buttressed by a new £80bn Funding for Lending scheme and a growing emergency repo programme that will unburden banks from their stupid decisions in the capital markets) saying "they create money in the economy and that can have an effect."

Well, it is having an effect - but not where it's needed.

Demand will simply not materialize in a modern economy when more and more of a person's monthly wages are spent on the "inelastic", as economists like to call our basic living needs. And it certainly won't be revived when too many of us have no confidence in either our jobs - or the companies we work for - actually existing in 12 months' time.

The structural deficiencies in the British economy are so extreme - and yet so blatantly obvious - as to be impervious to the ignition of "enticed demand" from the simple expansion of money supply.

How, for example, does *more* money slow the advance of transport costs in rail-dependent country that already has the highest fares in Europe and little or no competition between operators on the main commuter routes?

How does increased small business lending slow home energy costs when the bulk of our natural gas prices are more than double those in the United States (average: $9 per BTU for the benchmark British National Balancing Point price versus around $4 per BTU across the Altantic).

How will easing the balance sheet woes of banks help ease back the now permanently high global oil price (or, indeed, compel a re-think of the ridiculous "fuel tax escalator")?

How will *anything* King and Co. do loosen the grip of Europe's Common Agricultural Policy on regional food prices?

In fact, there's more than a hint of evidence that central bank efforts to "re-arm" the banks with capital firepower has done little more than shift their irresponsible speculation from property markets to commodity markets, taking oil, gas, corn and wheat prices, at varying times, to record highs over the past four years.

Once again, the lucky taxpayer who's footing the bill for "extraordinary" monetary policy gets whacked on the return trip in the form of higher energy, food and transportation costs.


I'm not suggesting any of the above concerns can be addressed over the course of few BoE inflation reports, but it does seem fairly clear that the hodgepodge of government policy (from both sides of the House) and the globalisation of commodities markets has effectively immunised our economy from the stimulative efforts of the Central Bank.

So we either re-visit the titanically bad decisions that were taken during the de-regulation of our transport and energy markets or we admit defeat and cease throwing good money after bad in a vain attempt to knock over a brick wall with a cannon full of feathers.

In the meantime, we can all dig into our pockets just a little deeper, because everything associated with either writing or reading this article is more expensive now that it was when we started.